Is Six Figures Really That Much?

By Catherine Shaffer on 13 February 2008 117 comments
Photo: Toni V.

There's a fascinating discussion going on over at Free Money Finance about families who are struggling to get by on six figure incomes. The overall tone of the discussion is wincingly critical. And I can understand why. For a very long time, the term "six figure" income was used to indicate that someone was very well-off. But the buying power of a six figure income has been eroded quite a bit by inflation, since my childhood, when only basketball stars and corporate CEO's made six figure incomes. Nowadays, six figures is still above average, but its buying power in terms of lifestyle may have eroded even more than the value of a dollar, as those of us within striking distance of six figures have learned to our regret.

My husband and I earned $96,000 from our respective jobs last year. This is our best year, yet. But this year, like every year, we are looking at that number and wondering where it all went. We aren't profligate spenders. We're both lifelong tightwads who live in a modest 1300 square foot home and drive two older vehicles. One is ten years old, the other five years old. We send our child (he's in the "middle" between the two cars in age) to public schools, and we buy most of our clothes either on extreme clearance or at resale shops. When we make a major purchase, we do research and look for great deals.

Are we struggling? Far from it. We contribute to retirement accounts, give to charity, enjoy one or two modest vacations per year, and have made good progress paying down some debts from previous, leaner years. We are not living paycheck to paycheck. But barely...

See, this six figure lifestyle isn't all it's cracked up to be. My minivan has a rust hole all the way through one of its doors. And right now I am wearing a sweater that is fraying at the cuff. Where is my Mercedes Benz? And why can't I afford to shop at The Gap or Eddie Bauer for all our clothes?

If the American dream is living in a nice house in the suburbs (3 bedrooms, 2 baths, finished basement rec room with "man cave," swimming pool in the back yard), driving two newer cars, taking family vacations to the Grand Canyon, having a "date night" once per week, cell phones for each family member, flat screen TVs, buying your clothes, furniture, and appliances brand new--well, I'm sorry but $100,000 year doesn't cover it. Not even close.

If I have to shop garage sales, clip coupons, and rinse out ziploc bags to afford my modest, working-class lifestyle on just under 100 grand, how the heck would I be able to send two children to college? This is the stuff of nightmares. We are working hard right now to pay off old debts (we are almost done), to build up emergency savings, and try to get a tiny bit ahead. But it's hard. Every time we think we're making progress, we get knocked back by something like a major car repair, a leaky roof, a sidewalk assessment, or a $4000 veterinary bill (yes, that actually happened to us). I'm just hoping that between whatever we can scrape together for a college fund, and what we can earn when the time comes, that we can keep up with those bills. Maybe by 2018, colleges and the government will no longer consider families that earn $100,000 to be "rich," and will make some financial aid available. I'm not betting on it.

Here are some amusing suggestions from FMF's comment thread:

Move to the inner city for less expensive housing.

Get rid of your cable TV and/or premium channels.

Move to another area of the country.

Drive cheaper cars.

These are all perfectly reasonable suggestions for cutting your costs, but why should someone who is making six figures have to live in the ghetto and drive old cars? And if premium cable television is not intended for six figure households, then who is it for--those who make $1,000,000/year or more? If new cars aren't for middle class Americans with average or above average incomes, then why are all those commercials showing up on my favorite TV shows?

Something has changed since the 1970's when Mike Brady was able to support his wife, six kids, the dog and the housekeeper on a single income in relative style and comfort. Instead of criticizing people in the upper income brackets because they can't afford their lifestyles, maybe we should take another look at our expectations. Why are we all getting poorer? What is a realistic middle class lifestyle? Do we even know anymore?

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Guest's picture

This post is ridiculous for so many reasons.

1) You aren't making 6 figures. heck even you and your hubbies COMBINED income is not six figures. I think you are misunderstanding the concept. The idea is if a single individual has a six figure income then that single individual will be quite well off. With 3 total mouths to feed on 2 incomes that are less than 50k each you have a family income average of $32k/person. Thats why you feel like you are broke.

2) Check your food spending. The very first mistake people make when they finally start making a little bit of money is spending gobs of money on food. 30 dollar meals instead of 3 dollar meals add up real fast. How often do you eat out? When you eat in how often do you have a steak instead of a can of soup or a bowl of ramen? If you are spending $50 a day on food (thats about 5 dollars per person per meal.. not hard to do) thats eating up $18,000 of your 96K/year income. I also bet you are talking pre-tax income. So if we take out the basic taxes thats only about $79k/year. subtract that food bill and you are at 60k a year.

3) while 100k is a six figure number... its not the ONLY six figure number. its the absolute smallest. six figures doesnt mean 100k specifically.

4) put that charity money towards a car payment and you might be getting somewhere. JUUUUST sayin.

Guest's picture
Rob Roush

CAR PAYMENT? Not if I can help it! Given all of the other "necessities" in life...why would anyone by a NEW car EVER? I don't care how much money you have, you might as well burn it (along with the gas you can barely afford these days) than spend it on anything brand new! Vehicles have to be the biggest rip-off known to civilized society. They are all instant deficits with no chance of return. These days low mileage is around why would anyone buy new? I find it appalling that the auto industry could ever justify the ridiculous price tags on cars. And I can't believe that people are willing to pay the equivalent of a small starter home for a motor with wheels! Sadly, most people splurge more on their rides than anything else as a EXPRESSION of their personalities. All I can see about your personalities with those kind of purchases is "sucker"...Hey...look how much I got taken for...all to drive this temporarily nice money pit of eventual rusted junk! Make practical fact, BE PRACTICAL is the key to financial happiness!

Guest's picture

Weird... we're not making close to what you are, and we seem to be doing a lot better here on the northeastern coastal Boston area suburbs (two adults, one toddler, walking distance to the beach) without having to clip coupons or cope with rust holes. I'd love to know more about where your money is going because honestly, I cannot fathom making that much while also living frugally and still having problems getting by.

Guest's picture

We live in the Boston area. We have a dual income and now kids with a pre-tax salaries around $170,000 and we are not struggling, but we're not getting ahead. People will flame asking "where is the $ going?!?". So as a preemptive strike, I will just say that it doesn't go that far because of Uncle Sam and the fact that we're savers. We save close to 40% of our salaries maxing out IRA's, 401K's and taxable accounts. We're also paying off student loans and dealing with the cost of utilities.

I find it funny that we pay close to $120/ month for cable when I've talked to people who got the Spanish version of our package for less than $40/month. Not a jab at anyone, just an observation.

6 figure incomes, when saving like one should, does not get you very far in life these days.

Guest's picture

thank you for this article. I don't make 100,000/year yet. I'm working on that. Right now I am the only income source in our family. My husbsnd stays at home to care for our autistic son and to home school our son. My income is close to 70,000/annually. If you re-read your post, you need to appreciate all that you are able to do. If you are able to put money into a retirement plan. That is a blessing! People who make less than you do with a family of 4 may not be able to do so. You live in a nice home, and you are probably able to eat well, and eat out often.
I'm not complaining about my income or lifestyle. I know that if I want more I need to take the necessary steps to make more without it affecting my family. I live in the suburbs of Denver (Green Valley Ranch). I could have bought the same home in Highlands Ranch (another suburb) for $20,000 more, just for the "status". Debt, I was unemployed for 10 months in 2010. How we managed to live off my unemployment check was with alot of creativity. I didn't even loose my home. Infact, since going back to work (8 months now). I have been making the regular mortgage and extra to get caught up. I have one more month left then I'll be all caught up.Yeaaa!
What it all comes down to is managing money, and thinking positive. If my husband and I can make $68,000/year work well for us. I know what we'll do with $100,000/year. I'll trade in my 14 year old toyota corolla for a toyota highlander right away! Fix up my 3 bedroom, 3 bath home, to make it fell like a mansion. Set up my retirement fund (late bloomer), and enjoy life! It's not about how much stuff you have! It's about what you do with what you have.
Last, remember, the more you make,the more the goverment takes. Your health insurance probably eats up 1/3 of what you make as well. So, inessence, you make close to 100,000/yr, but bring home 80,000.00 a year.

Guest's picture

I am a recent college grad and I live in the Washington DC metro area. I totally believe that a 100k+ income isn't enough for a family. Whoever makes less than that (i.e. me) is pretty much screwed (unless they eat McDonald's and buy processed foods from the supermarket, which is going to bite you when you get older anyway). Anyone who says they can live comfortably off of a 50k income with kids is crazy, and if you can in some god-knows-where rural America it may be ok now but things are just going to get more expensive in these times and I'll bet you your salary isn't going to keep up no matter who you are.

Guest's picture

I agree while you, Catherine. My income, home size, and vehicles are almost exactly like yours. We own a family business which sucks over $70K in our income, but gives another family $25K or so yearly (more if the work wasn't seasonal). So, we really live off of about $28K. I understand how people think we are being "snobbist", but I'm not complaining. Until someone walks in our shoes, they won't believe the travesty either.

The point of the article is that even though we may be in the top 10% of earners, we're barely scraping by, by no fault of our own. We've lived within our means and done the "right" things, and we seem to be punished by it. Our dollars just don't go very far. I have no debt besides my mortgage & about 2K in student loans. There is no Starbucks habit, only Sunday breakfast. I'm not living large, but the Haters will still hate. "America is broken, and it's breaking the backs of middle- class Americans.

As a side note about ways to save money listed in the article: 1) I witnessed a murder firsthand while living in the ghetto and decided it wasn't worth my health and safety. I'd also pay more for a much smaller apartment than my current mortage + taxes + insurance. 2) My hubby tried the internet TV thing, but connections weren't very fast and we ended up paying for most programs. 3) We've never bought a new car or gas guzzler. 4) Moving requires a lot of money.

Guest's picture

Umm ya'll are trippin. My wife and I make 48K a year and have decent 3/2 house with an HOA. I got student loans, and our cars are about 4 years old. We have 2 kids, and are saving up for college. We don't take fancy trips, we go out now and then but nothing fancy. We work, play with our kids, and thats about it.

The American dream is still viable, the problem is people are getting GREEDIER! Look at the avg house size now compared to the 1960s. How many TVs do you need in your house? How many new pairs of shoes?

Relative deprivation, don't believe me Check this out

Guest's picture

I have to say I agree!!!!!
I watch house hunters on HGTV, and listen to the whinning women!OMG!!!!!!
I want this, I want that!!!!!
Americans need to buckle down on their spending and get real! If my husband I can live in a 3 bedroom 3 bath suburban home, off my one income of less than $100,000.00 per yeat others can too! We cook our wonderful meals instead of eatting out, we don't buy all the latest gadgets, just to have a iPod or iPad, or the latest cellphone. I spend $48.00 per month on my cell phone of 1000 minutes per month. I don't even use those minutes. If people need to talk to me, call me on my land phone.
It's all about managing what you have and being grateful for what you have.
I just paid off my past due house payments plus stayed current with my house payments, and have not missed a payment prior to losing my job, and since getting hired again. Again, my husband has to stay home to care for our son who is autistic. When we made the decision for us to live off one pay check, we cut pack, on extra spending and haven't missed a thing.
If anyone wants to know how to live off one paycheck under $100,000 email me. I'll tell you how.

Guest's picture

I would like to mention Americas bad habit of purchasing on credit. Instead of buying it now save and get it later. The interest some people pay is more then a lot of the peoples in this worlds yearly income

Guest's picture

Tv sets unrealistic expectations, also I recall the Brady's having one car.

Guest's picture

I just happened upon this old article. I guess it depends on where you live and what you consider an ample lifestyle. I make $110K myself and my wife makes about $20K as a teaching assistant. We live in the Southeast, but in a nice suburb. We don't live like rock stars of course, but we have a very comfortable life. 4 bedroom 3 bath house with a big pool on 2 acres in an affluent area. My son goes to a state university and I pay for it. I generally save about 10% to my 401K and have about $400K in overall savings. My house is modest for the area and is probably worth about $300K. I have two new(er) cars and one is totally paid off. No credit card debt. We spend judiciously and our only true splurge is dining out, which we do several times a week. We have cable, one big flat panel TV, two computers, 2 iPhones, etc. All typical suburban garb. Life is generally good. No complaints. I'd love more money, but it wouldn't really make my life any better. It would take serious money to make a huge difference in my lifestyle. I read your post and really wondered where in the world you money is going. Once my son is out of college, I could have an equally satisfying life for around $60K a year. You need a financial advisor!

Guest's picture

We make 130K plus, 24K off investments without even having to work on top of that and we decided to rent out our big fancy house in the city for a profit. Paid $300 for a mobile home on the lake fixed it and now buying a house in a safe TINY country town that is livable, new 8K A/c, real wood floors and over half an acre for $23K. We have 80K in 2 cars due to our previous lifestyle and you cant tell me that us living below our means isnt anything anyone in the USA couldnt do. We all make our life choices, I think cable is a waste of money, we shop at good will, we shop at Aldi, I do deals online and coupon because we value every dollar my husband earns for us. I do not work so my job is to get the most out of our money and save or invest it for our futures. We are 38 years old, now is the time when the kids are little to live below your means and get ahead so we are not 60 with a mortgage and not being able to find employment! Really I Know people suffering and we take far more drastic savings measures and living below our means then most people we know. Every day we all make life choices. I know a couple making over $600K one lost her job then 6 weeks later so did her husband. I am sorry but some people that make $25K, live below their means, without debt and can save and not loose everything at the loss of a job or illness have far more of my respect then people making 6 figures that blow their cash, live paycheck to paycheck and say its the economy and inflation. If I can hand wash dishes in a bathroom sink and make as much money as we do then so can anyone. Yes we do have 3 houses only one is big and fancy the others are works in progress with CASH :) and at least we have someone else paying the mortgage on the big one in the city while we profit off it as well.

Guest's picture

People always think that 100k a year means you will be driving a Bentley. I used to think this too when I was an undergrad. In Philadelphia I have to pay a lot of taxes on my $115,000 income. Then, since housing is expensive, another big chunk goes there. I live well below my means, but this isn't Bentley money. 300K is Bentley money.

Guest's picture

My boyfriend and I together make about 250K which makes us rich right? I don't feel like we are really wealthy or anything like that. Sure we live in a five bedroom house in the bay area with no kids but we still watch what we spend. I think we have it good but we are definitely not super rich by any means.

Guest's picture
Italian Guest

I live in Italy and I DO NOT HAVE have
student loans, rent, car payment, entertainment, cable.
I have gas and electric, cell phone.
but my taxes are 53% of my 54.000 Euro pretax annual income.
Yes I have no debts. Maybe having no debts is not a driver for more working.
But that's it. The difference I think lays in family ties. Lots of parents here rarely went on holidays (but holiday in italy come cheap, we're small and surrounded by sea) and left a property to their sons.

Guest's picture

Oh, whoa is me. The poor upper middle class.

It's all about choices. Where you live is the biggest one. How you spend your money is up to you!

I can't feel sorry for anyone making this much money. It's enough. If it isn't, go out and make more, but don't complain when most only make half of what you do.